My Recharge

The most important moments of 2017

IN DEPTH | Leigh Collins looks back over an exciting year and pinpoints those moments that will have a lasting impact on the global renewables industry

2017 was an extraordinary 12 months for the renewables industry. Offshore wind prices unexpectedly came crashing down to zero-subsidy levels, onshore wind and solar prices continued to fall to record lows and the Trump administration began its dangerous ideological fight against climate change.

But amid the headline-grabbing stories, there were many, many small victories that the world may not have noticed. Europe’s major utilities pledged to become carbon-neutral “well before 2050”; Big Oil upped its investments in offshore wind; the first commercial floating wind farm was switched on; the first 9.5MW turbine was launched; Spain re-embraced renewables with 8GW of tenders; Russia finally began to take renewables seriously, with a 1.65GW wind tender; and solar was revealed as the fastest-growing energy source in the world.

Zero-subsidy offshore tenders

Back in April, the news that Germany had awarded zero-subsidy tenders to utility EnBW and Dong Energy (now Orsted) was so unexpected and confusing that Recharge initially assumed the usually fastidious Germans had made a mistake — how could anyone build offshore wind farms for €0/MWh? After some frantic phone calls, it became apparent that the figure was purely related to the cost of the subsidy, and that the two developers would only receive the wholesale market price for their power.

The two companies had made an unprecedented bet that: a) Cost-saving 12MW+ turbines would be commercially available by the time of commissioning in 2024-25; and b) that wholesale prices would be a lot higher by then.

Some thought this was merely a one-off due to the long lead times involved — that the next offshore tenders would not be so bold.

But the Dutch government saw an opportunity, and promptly announced that it would open up the tender for the up-to-760MW Hollandse Kust South 1 & 2 zone solely to subsidy-free bids. With two fewer years to build the projects, many experts thought such bids were unlikely. But in December, both Vattenfall and Statoil did just that.

In the UK, 3.2GW of offshore projects to be deployed in 2021-22 were awarded for as little as £57.50 ($77.90) per MWh in September — half the price awarded at the previous tender in 2015. These Contracts for Difference awards mean that developers are guaranteed a per-MWh price — if the wholesale market price is lower, the government pays a top-up to reach that level, but if the wholesale price is higher, the developer has to pay the government the difference.

With the average monthly wholesale day-ahead market price of £54.79 in December and prices generally rising, the UK’s offshore wind could yet become subsidy-free — or even provide net income to the UK exchequer.

Solar on top as Mexico confirms record-low prices in third tender

Onshore wind — Germany/Spain/Mexico

The price of onshore wind also fell rapidly in 2017.

In May, Germany’s first-ever onshore tender, for 807MW, saw an average winning price of €57.10 ($68.50) per MWh. A second auction in August, for 1.01GW, saw that price fall to €42.80 — while a third tender in November, for 1GW, came in with average winning bids of €38.20/MWh. That was an astonishing 33% decrease in just six months. Plus, the lowest winning bid in November came in at a surprisingly low €22/MWh.

That low price was beaten that same month at Mexico’s third clean-energy tender by Italian utility Enel’s winning bid of $17.70/MWh.

Spain also held its first renewables tender, for 3GW, in May — after years in the doldrums following retroactive changes to feed-in tariffs in 2013 — which saw record low onshore wind prices of €43/MWh. A follow-up tender in July that was billed as another 3GW auction eventually saw 5GW of wind and solar awarded.

The old notion that wind power is an inefficient energy source needing a huge amount of subsidies is now long gone, especially with the news that wind provided 43.6% of Denmark’s total electricity consumption in 2017.

US investors propose 72.5GW of wind projects through 2020

US

Having claimed that climate change was somehow a hoax invented by the Chinese to make US manufacturing uncompetitive, no-one expected President Donald Trump — or the climate-sceptic Republicans controlling Congress — to be gung-ho in favour of renewables.

But despite pledging to pull out of the Paris Agreement and rescinding Barack Obama’s Clean Power Plan, and despite the House of Representatives voting to scrap the wind production tax credit (PTC), the US wind industry has actually entered 2018 relatively intact.

The PTC survived the final tax reform bill passed by Congress, while the ever-shrinking price of wind and solar, plus energy company concerns about climate change, sustainability and possible post-Trump carbon prices, made the Clean Power Plan and Paris Agreement moves largely irrelevant.

In October, the American Wind Energy Association announced that a record 29.6GW of US wind projects were under construction or in advanced development, a 27% increase on a year earlier, with 85GW already installed.

Of more concern to the US renewables industry was the decision in September to impose tariffs on imported PV panels, after the US International Trade Commission’s four commissioners unanimously ruled that imported solar equipment had caused “serious injury” to domestic manufacturers under the rarely used Section 201 of the 1974 Trade Act.

The vast majority of PV equipment deployed in America is imported, mainly from China, and ironically, the two plaintiff petitioners — SolarWorld Americas and the bankrupt Suniva — are owned by foreign companies: Germany’s insolvent SolarWorld and China’s Shunfeng International Clean Energy. And even the two largest US-based solar-equipment makers — First Solar and SunPower — do most of their manufacturing overseas.

The Trump administration's final ruling, which was announced on 22 January, saw a tariff of 30% imposed, which will phase down five percentage points over each of the following three years to 15%. The first 2.5GW of solar cell imports are exempt for each year.

The Solar Energy Industries Association said the move would cost roughly 23,000 American jobs this year, including many in manufacturing, and will “result in the delay or cancellation of billions of dollars in solar investments”.

China and other countries are expected to challenge the ruling at the World Trade Organization (WTO). The last time the US imposed tariffs under Section 201, in an attempt to protect US steel in 2001, the WTO overturned the order.

GE to supply 3MW wind turbines for DTEK Ukraine project

Russia

Despite only having 15MW of installed wind across its vast terrain, Russia launched a 1.65GW wind tender in June, with 1GW of that being awarded to a consortium of Finnish utility Fortum and Russian state-owned Rusnano. Vestas is in line to supply all the turbines to the joint venture, and plans to build blade, tower and nacelle plants in the country. Due to the relative remoteness of project sites, stringent local-content requirements, a relatively short 15-year support span and rather complex tendering rules involving the yield of long-term Russian bonds, winning bids were much higher than in Germany and Spain. Fortum said it expects to receive €115-135/MWh for the projects.

Russia is very much now on the wind industry’s agenda, with the country promising to hold tenders for 899MW in 2018.

Turbine makers

The big OEM news of the year was the merger of Siemens Wind Power and Gamesa in April, creating the snappily named Siemens Gamesa Renewable Energy (SGRE).

But SGRE did not get off to the best of starts, with several high-level personnel changes in the first few months, and a debut quarter that saw orders fall sharply — blamed on a slowdown in the Indian market and “volatility” in the offshore business. The new company also inherited offshore turbine maker Adwen, the Gamesa-Areva joint venture, and shuttered it within months, having no need for two competing 8MW machines. At least 1GW of Adwen’s 1.5GW of orders — all in France — will now be replaced with Siemens’ D8 machine.

MHI Vestas launches 9.5MW offshore wind turbine

The size of turbines, particularly offshore, kept growing in 2017. MHI Vestas’ launch of a 9.5MW V164 model in June — only five months after announcing a 9MW version — became Recharge’s most-read online story of the year.

Senvion soon responded that it would have a 10MW-plus machine ready in the early 2020s, while SGRE and GE also working on 10MW-plus turbines. Consulting group MAKE predicted in June that 12MW models will appear “within the next couple of years”.

Vestas also expanded into the 4MW-plus category onshore by introducing three 4.2MW models in June — joining Enercon, SGRE and small Netherlands-based OEM Lagerwey as providers of 4MW-class onshore turbines — and helping the Danish group land record orders of nearly 10.7GW in 2017.

Big Oil

Several oil & gas majors significantly increased their investment in renewables in 2017, a tacit acknowledgment that the world cannot burn fossil fuels forever and that they should use their vast wealth to pursue alternative energy solutions.

“We believe we are in the middle of an energy transition that is unstoppable,” said Shell boss Ben van Beurden in February. “We want to be in the vanguard of that, we want to be a beneficiary of that energy transition rather than fighting a rearguard action.”

After winning the Dutch tender for the Borssele 3 & 4 offshore wind farm in December 2016, van Beurden said in February that Shell would continue to pursue offshore wind opportunities “with conviction”, later calling for 10GW multi-owner mega-projects to be built.

Shell to double 'new energies' spending in accelerated push

After announcing a plan in March to invest up to $1bn a year in renewables by 2020, van Beurden upped the ante in November, saying the Anglo-Dutch giant would invest £1bn-2bn a year in 2018-20. This is, however, still a small fraction of the corporation’s planned $25bn-30bn annual capital spend.

Statoil — the world’s largest offshore oil operator — has also been stepping up its offshore wind ambitions with the 5GW-plus Dogger Bank mega-project off the UK, a 1GW-plus development zone off the US East Coast and a zero-subsidy bid in the recent Dutch offshore tender.

And in October, the Norwegian company switched on the world’s first commercial floating wind farm, the 30MW Hywind Scotland, in the UK North Sea.

Goodbye Dong, hello Ørsted

The world’s largest offshore wind developer, Dong Energy, sold off its oil & gas exploration and production unit to UK firm Ineos for $1.3bn in May, completing the company’s “transformation into a leading pure-play renewables company” (despite hanging on to some gas-fired power plants). It no longer made sense to still be called Danish Oil and Natural Gas, so the company changed its name to Orsted, after Danish scientist Hans Christian Orsted, who discovered that electricity produced magnetic fields in 1820.

Other notable developments

In December, chief executives from all major power companies in Europe committed to achieving a carbon-neutral electricity mix in the EU “well before 2050” under a Eurelectric initiative.

Asia’s largest offshore wind farm, the 302MW Rudong Baxianjiao project, was commissioned off Jiangsu province, China, in October by power giant Huaneng — while another 4GW of Chinese offshore projects are now under construction.

A few days later, also in October, Taiwan announced it was increasing its offshore wind target from 3GW to 5.5GW by 2025. Orsted has 2.4GW of approved projects off Taiwan.

Africa’s largest wind farm, the remote 310MW Lake Turkana project in Kenya, was completed ahead of schedule by Vestas in June, but the 428km transmission link to connect it to the national grid is not now due to be completed until this year.

Two-bladed offshore wind pioneer Seawind landed a breakout deal in November to build fixed-bottom and floating arrays of 50-100MW to power islands in Greece’s Aegean Sea. A 6.2MW two-blade prototype is due to be installed off Norway this year. Seawind chief executive Martin Jakubowski’s column for Recharge in March, which declared that two-blade machines could halve the cost of offshore wind energy, was our fifth most-read story online in 2017.

China unveiled the world’s largest carbon market in December — initially for 1,700 power-generation companies when it starts up in 2019 — with plans to add 7,000 heavy industrial companies at a later date. It will cover 3.5 billion tonnes of CO2 per year initially — which would immediately make it larger than the 1.95 billion tonnes in the EU’s Energy Trading System (ETS).

In November, the European Parliament and Council agreed to reform the ETS, speeding up the reduction of the current oversupply of allowances. A strengthened ETS would make it more expensive for utilities and industry to emit CO2, thereby speeding up the transition to clean energy. But the move was criticised as not being enough for the EU to meet its Paris Agreement pledges.

The corporate renewables sector continued to grow rapidly in 2017, with Google and Lego both announcing that they are now 100% powered by clean energy, and Citibank, JP Morgan Chase, Kellogg’s and Vestas among companies that last year pledged to do the same.

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The most important moments of 2017

The most important moments of 2017

IN DEPTH | Leigh Collins looks back over an exciting year and pinpoints those moments that will have a lasting impact on the global renewables industry

2017 was an extraordinary 12 months for the renewables industry. Offshore wind prices unexpectedly came crashing down to zero-subsidy levels, onshore wind and solar prices continued to fall to record lows and the Trump administration began its dangerous ideological fight against climate change.

But amid the headline-grabbing stories, there were many, many small victories that the world may not have noticed. Europe’s major utilities pledged to become carbon-neutral “well before 2050”; Big Oil upped its investments in offshore wind; the first commercial floating wind farm was switched on; the first 9.5MW turbine was launched; Spain re-embraced renewables with 8GW of tenders; Russia finally began to take renewables seriously, with a 1.65GW wind tender; and solar was revealed as the fastest-growing energy source in the world.

Zero-subsidy offshore tenders

Back in April, the news that Germany had awarded zero-subsidy tenders to utility EnBW and Dong Energy (now Orsted) was so unexpected and confusing that Recharge initially assumed the usually fastidious Germans had made a mistake — how could anyone build offshore wind farms for €0/MWh? After some frantic phone calls, it became apparent that the figure was purely related to the cost of the subsidy, and that the two developers would only receive the wholesale market price for their power.

The two companies had made an unprecedented bet that: a) Cost-saving 12MW+ turbines would be commercially available by the time of commissioning in 2024-25; and b) that wholesale prices would be a lot higher by then.

Some thought this was merely a one-off due to the long lead times involved — that the next offshore tenders would not be so bold.

But the Dutch government saw an opportunity, and promptly announced that it would open up the tender for the up-to-760MW Hollandse Kust South 1 & 2 zone solely to subsidy-free bids. With two fewer years to build the projects, many experts thought such bids were unlikely. But in December, both Vattenfall and Statoil did just that.

In the UK, 3.2GW of offshore projects to be deployed in 2021-22 were awarded for as little as £57.50 ($77.90) per MWh in September — half the price awarded at the previous tender in 2015. These Contracts for Difference awards mean that developers are guaranteed a per-MWh price — if the wholesale market price is lower, the government pays a top-up to reach that level, but if the wholesale price is higher, the developer has to pay the government the difference.

With the average monthly wholesale day-ahead market price of £54.79 in December and prices generally rising, the UK’s offshore wind could yet become subsidy-free — or even provide net income to the UK exchequer.

Solar on top as Mexico confirms record-low prices in third tender

Onshore wind — Germany/Spain/Mexico

The price of onshore wind also fell rapidly in 2017.

In May, Germany’s first-ever onshore tender, for 807MW, saw an average winning price of €57.10 ($68.50) per MWh. A second auction in August, for 1.01GW, saw that price fall to €42.80 — while a third tender in November, for 1GW, came in with average winning bids of €38.20/MWh. That was an astonishing 33% decrease in just six months. Plus, the lowest winning bid in November came in at a surprisingly low €22/MWh.

That low price was beaten that same month at Mexico’s third clean-energy tender by Italian utility Enel’s winning bid of $17.70/MWh.

Spain also held its first renewables tender, for 3GW, in May — after years in the doldrums following retroactive changes to feed-in tariffs in 2013 — which saw record low onshore wind prices of €43/MWh. A follow-up tender in July that was billed as another 3GW auction eventually saw 5GW of wind and solar awarded.

The old notion that wind power is an inefficient energy source needing a huge amount of subsidies is now long gone, especially with the news that wind provided 43.6% of Denmark’s total electricity consumption in 2017.

US investors propose 72.5GW of wind projects through 2020

US

Having claimed that climate change was somehow a hoax invented by the Chinese to make US manufacturing uncompetitive, no-one expected President Donald Trump — or the climate-sceptic Republicans controlling Congress — to be gung-ho in favour of renewables.

But despite pledging to pull out of the Paris Agreement and rescinding Barack Obama’s Clean Power Plan, and despite the House of Representatives voting to scrap the wind production tax credit (PTC), the US wind industry has actually entered 2018 relatively intact.

The PTC survived the final tax reform bill passed by Congress, while the ever-shrinking price of wind and solar, plus energy company concerns about climate change, sustainability and possible post-Trump carbon prices, made the Clean Power Plan and Paris Agreement moves largely irrelevant.

In October, the American Wind Energy Association announced that a record 29.6GW of US wind projects were under construction or in advanced development, a 27% increase on a year earlier, with 85GW already installed.

Of more concern to the US renewables industry was the decision in September to impose tariffs on imported PV panels, after the US International Trade Commission’s four commissioners unanimously ruled that imported solar equipment had caused “serious injury” to domestic manufacturers under the rarely used Section 201 of the 1974 Trade Act.

The vast majority of PV equipment deployed in America is imported, mainly from China, and ironically, the two plaintiff petitioners — SolarWorld Americas and the bankrupt Suniva — are owned by foreign companies: Germany’s insolvent SolarWorld and China’s Shunfeng International Clean Energy. And even the two largest US-based solar-equipment makers — First Solar and SunPower — do most of their manufacturing overseas.

The Trump administration's final ruling, which was announced on 22 January, saw a tariff of 30% imposed, which will phase down five percentage points over each of the following three years to 15%. The first 2.5GW of solar cell imports are exempt for each year.

The Solar Energy Industries Association said the move would cost roughly 23,000 American jobs this year, including many in manufacturing, and will “result in the delay or cancellation of billions of dollars in solar investments”.

China and other countries are expected to challenge the ruling at the World Trade Organization (WTO). The last time the US imposed tariffs under Section 201, in an attempt to protect US steel in 2001, the WTO overturned the order.

GE to supply 3MW wind turbines for DTEK Ukraine project

Russia

Despite only having 15MW of installed wind across its vast terrain, Russia launched a 1.65GW wind tender in June, with 1GW of that being awarded to a consortium of Finnish utility Fortum and Russian state-owned Rusnano. Vestas is in line to supply all the turbines to the joint venture, and plans to build blade, tower and nacelle plants in the country. Due to the relative remoteness of project sites, stringent local-content requirements, a relatively short 15-year support span and rather complex tendering rules involving the yield of long-term Russian bonds, winning bids were much higher than in Germany and Spain. Fortum said it expects to receive €115-135/MWh for the projects.

Russia is very much now on the wind industry’s agenda, with the country promising to hold tenders for 899MW in 2018.

Turbine makers

The big OEM news of the year was the merger of Siemens Wind Power and Gamesa in April, creating the snappily named Siemens Gamesa Renewable Energy (SGRE).

But SGRE did not get off to the best of starts, with several high-level personnel changes in the first few months, and a debut quarter that saw orders fall sharply — blamed on a slowdown in the Indian market and “volatility” in the offshore business. The new company also inherited offshore turbine maker Adwen, the Gamesa-Areva joint venture, and shuttered it within months, having no need for two competing 8MW machines. At least 1GW of Adwen’s 1.5GW of orders — all in France — will now be replaced with Siemens’ D8 machine.

MHI Vestas launches 9.5MW offshore wind turbine

The size of turbines, particularly offshore, kept growing in 2017. MHI Vestas’ launch of a 9.5MW V164 model in June — only five months after announcing a 9MW version — became Recharge’s most-read online story of the year.

Senvion soon responded that it would have a 10MW-plus machine ready in the early 2020s, while SGRE and GE also working on 10MW-plus turbines. Consulting group MAKE predicted in June that 12MW models will appear “within the next couple of years”.

Vestas also expanded into the 4MW-plus category onshore by introducing three 4.2MW models in June — joining Enercon, SGRE and small Netherlands-based OEM Lagerwey as providers of 4MW-class onshore turbines — and helping the Danish group land record orders of nearly 10.7GW in 2017.

Big Oil

Several oil & gas majors significantly increased their investment in renewables in 2017, a tacit acknowledgment that the world cannot burn fossil fuels forever and that they should use their vast wealth to pursue alternative energy solutions.

“We believe we are in the middle of an energy transition that is unstoppable,” said Shell boss Ben van Beurden in February. “We want to be in the vanguard of that, we want to be a beneficiary of that energy transition rather than fighting a rearguard action.”

After winning the Dutch tender for the Borssele 3 & 4 offshore wind farm in December 2016, van Beurden said in February that Shell would continue to pursue offshore wind opportunities “with conviction”, later calling for 10GW multi-owner mega-projects to be built.

Shell to double 'new energies' spending in accelerated push

After announcing a plan in March to invest up to $1bn a year in renewables by 2020, van Beurden upped the ante in November, saying the Anglo-Dutch giant would invest £1bn-2bn a year in 2018-20. This is, however, still a small fraction of the corporation’s planned $25bn-30bn annual capital spend.

Statoil — the world’s largest offshore oil operator — has also been stepping up its offshore wind ambitions with the 5GW-plus Dogger Bank mega-project off the UK, a 1GW-plus development zone off the US East Coast and a zero-subsidy bid in the recent Dutch offshore tender.

And in October, the Norwegian company switched on the world’s first commercial floating wind farm, the 30MW Hywind Scotland, in the UK North Sea.

Goodbye Dong, hello Ørsted

The world’s largest offshore wind developer, Dong Energy, sold off its oil & gas exploration and production unit to UK firm Ineos for $1.3bn in May, completing the company’s “transformation into a leading pure-play renewables company” (despite hanging on to some gas-fired power plants). It no longer made sense to still be called Danish Oil and Natural Gas, so the company changed its name to Orsted, after Danish scientist Hans Christian Orsted, who discovered that electricity produced magnetic fields in 1820.

Other notable developments

In December, chief executives from all major power companies in Europe committed to achieving a carbon-neutral electricity mix in the EU “well before 2050” under a Eurelectric initiative.

Asia’s largest offshore wind farm, the 302MW Rudong Baxianjiao project, was commissioned off Jiangsu province, China, in October by power giant Huaneng — while another 4GW of Chinese offshore projects are now under construction.

A few days later, also in October, Taiwan announced it was increasing its offshore wind target from 3GW to 5.5GW by 2025. Orsted has 2.4GW of approved projects off Taiwan.

Africa’s largest wind farm, the remote 310MW Lake Turkana project in Kenya, was completed ahead of schedule by Vestas in June, but the 428km transmission link to connect it to the national grid is not now due to be completed until this year.

Two-bladed offshore wind pioneer Seawind landed a breakout deal in November to build fixed-bottom and floating arrays of 50-100MW to power islands in Greece’s Aegean Sea. A 6.2MW two-blade prototype is due to be installed off Norway this year. Seawind chief executive Martin Jakubowski’s column for Recharge in March, which declared that two-blade machines could halve the cost of offshore wind energy, was our fifth most-read story online in 2017.

China unveiled the world’s largest carbon market in December — initially for 1,700 power-generation companies when it starts up in 2019 — with plans to add 7,000 heavy industrial companies at a later date. It will cover 3.5 billion tonnes of CO2 per year initially — which would immediately make it larger than the 1.95 billion tonnes in the EU’s Energy Trading System (ETS).

In November, the European Parliament and Council agreed to reform the ETS, speeding up the reduction of the current oversupply of allowances. A strengthened ETS would make it more expensive for utilities and industry to emit CO2, thereby speeding up the transition to clean energy. But the move was criticised as not being enough for the EU to meet its Paris Agreement pledges.

The corporate renewables sector continued to grow rapidly in 2017, with Google and Lego both announcing that they are now 100% powered by clean energy, and Citibank, JP Morgan Chase, Kellogg’s and Vestas among companies that last year pledged to do the same.

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